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Despite high levels of merger activity, healthcare organizations still struggle to effectively integrate physician practices into the fold
The merger and acquisitions frenzy gripping the healthcare field is alive and well. A key indicator is the fact that hospitals continue to acquire physician practices at an impressive rate. According to 2018 research from the Physicians Advocacy Institute, hospitals acquired 5,000 physician practices in a single year, continuing a four-year trend that by all indications will persist.
Despite the high levels of activity, healthcare organizations still struggle to effectively integrate physician practices into the fold. From a business standpoint, there are several challenges that can emerge if the acquiring organization does not have a rigorous strategy in place.
The consequences of insufficient planning
Without a clear roadmap for physician practice adoption, a health system can run into financial and operational trouble. For example, an unoptimized transition plan can result in cash flow disruptions or a loss of cash due to inconsistent processes that result in payment delays or denials. The new entity can also see reduced profitability if there is a shortage of upfront research and due diligence because it may overestimate potential income that can’t be attained after the merger.
A lack of clarity and governance can yield provider dissatisfaction, especially if physicians are saddled with administrative tasks that shift focus away from patient care. It also is not unusual to see staff
productivity decline as employees become overburdened with new processes and workflows -particularly if they are working in legacy systems as well as new ones.
Strategies for mitigating risk
To ensure success when enfolding physician practices into an existing health system, organizations must think through their approach to the initiative. Such a plan should include several best practices that can avert potential slowdowns and profitability losses and facilitate a smooth and financially lucrative transition. Here are a few tactics every acquisition plan should include.
Engage in robust billing due diligence
Before acquiring a physician practice, a hospital or health system needs to thoroughly review the entity’s current billing to ensure it understands a realistic picture of current performance. As part of this review, the acquiring entity should conduct an in-depth CPT volume analysis to gauge potential revenue increase. Where possible, it should also examine existing contracts to uncover potential symmetries, as well as concerning areas. Both of these efforts will allow for better financial forecasting and enable the organization to set realistic expectations around short- and long-term financial gains.
The health system should also determine a plan for the practice’s legacy accounts receivable (A/R), deciding whether the health system will take control over it or whether it should be excluded from the arrangement’s purview. An organization may also decide to contract with an outside vendor for this work. Any of these options are valid: the important thing is to settle on an approach upfront.
Conduct a strong credentialing process
This is an area that often falls apart during acquisitions. In some cases, an organization will begin the credentialing process late or won’t engage in a full vetting, and the result is an inability to bill for physicians’ time, which causes a dip in cash. To be effective, organizations should allow five to six months for this process and regularly revisit the timeline to ensure credentialing efforts remain on schedule and on track. As credentialing is a lengthy process, it’s also critical to identify which providers may have special provisions and work those factors into the timeline to ensure all providers and special items are properly vetted.
Determine technology integration in advance
A physician practice will most likely have different information technology than the acquiring organization. The health system must decide whether to onboard the physician practice into the health system’s technology or allow it to continue to use its own solutions. There are advantages and disadvantages to both approaches. For example, moving to a single system can be expensive and sometimes cost prohibitive. However, consolidating technology allows for standardization across the organization and easier decision making. By making the choice ahead of time, the health system can realize greater consistency in all its associations and affiliations, applying the same strategy across the board.
Regularly assess staffing needs
It is not unusual to see some staff turnover after an acquisition. To prevent performance dips or negative financial ramifications, an organization should determine it has enough staff to keep up with billing and A/R. The organization should also monitor productivity levels throughout the transition to ensure they remain stable. It can even put processes in place to smooth out fluctuations. Some of these processes include monitoring old systems to ensure productivity is maintained prior to go live, which ensures revenue from old claims bridge the new system gap. Further, it’s crucial to provide the appropriate amount of time for training staff on the new system to ensure that all team members are on-boarded appropriately and can achieve productivity goals.
The move from a freestanding physician practice to an integrated health system is complex, and so it is important to have accessible training for physicians, staff and other key stakeholders as they adjust to new processes, expectations, and culture. Also, be sure to establish clear roles and help staff understand how to access help if they need it.
The role of an outside vendor
Third-party resources can support health systems and physician practices in making the transition, whether through strategic planning, taking over certain functions, or providing resources. More specifically, an external partner can monitor denials upon go-live to quickly identify any issues that need to be addressed; wind down legacy A/R to ensure cash flow remains consistent; reduce physician and support staff administrative burdens by transferring and validating critical patient health and demographic data from legacy systems into new systems; and provide assistance with training, IT support, and other critical resources. Often times, outsourcing revenue cycle management solutions (RCM) to the right partner can lead to great success.
The key to success is in the planning
As hospitals continue to combine with physician practices, it is imperative to create comprehensive roadmaps to guide the work. These should include detailed due diligence, robust training, and regular monitoring to ensure the overall health system achieves its short-term and long-term financial goals.
Deval Majmudar is senior vice president of RCM operations for IKS.